Pier 1 2008 Annual Report Download - page 114

Option 2 will vest up to 1,000,000 additional shares based upon achieving a percentage of the fiscal 2010
EBITDA target as follows:
100% of the 2010 EBITDA Target — 1,000,000 shares;
98% of the 2010 EBITDA Target — 900,000 shares;
96% of the 2010 EBITDA Target — 800,000 shares;
94% of the 2010 EBITDA Target — 700,000 shares;
92% of the 2010 EBITDA Target — 600,000 shares; and
90% of the 2010 EBITDA Target — 500,000 shares.
If Pier 1 Imports’ aggregate consolidated EBITDA for fiscal years 2009 and 2010 equals or exceeds the
sum of the fiscal 2009 EBITDA target plus the fiscal 2010 EBITDA target, then any Option 2 shares that did
not vest at the end of fiscal 2009 may be earned and vest at the end of fiscal 2010. Both Option 1 and Option 2
have an exercise price of $6.69 per share and expire February 19, 2017. Subject to certain terms of the
employment agreement, Mr. Smith must be employed with Pier 1 Imports at the end of each respective fiscal
year for Option 2 to vest.
In addition, pursuant to the employment agreement, during fiscal 2008 Mr. Smith:
• received $500,000 as reimbursement for his lost benefits under the long-range performance incentive
plan of his former employer;
• became a participant in Pier 1 Imports’ Supplemental Retirement Plan at the same level as his accrued
benefits at present value under the supplemental executive retirement plan of his former employer. This
was achieved by crediting Mr. Smith with 10 years of plan participation and 6.67 years of credited
service as defined by the supplemental retirement plan. Mr. Smith was also given the option to, and
did, elect a lump-sum payment option for his accrued benefit under the plan. The calculation of his
benefits under the plan is not subject to the plan’s cap of $500,000 on accrued annual benefits; and
• received the perquisites described above for Pier 1 Imports’ executive officers plus the remaining
portion of the allowance of $125,000 for moving, relocation and related expenses, including temporary
housing, short-term automobile rental or lease expenses and legal fees. In addition, Pier 1 Imports paid
all travel expenses for Mr. Smith and his spouse from February 19, 2007 through May 19, 2007 for
travel between Boston and Fort Worth.
The employment agreement contains non-solicitation and non-competition agreements binding Mr. Smith
for one year following termination of employment.
Compensation Determinations and Role of Executive Officers
Base pay, short-term incentive and long-term incentive compensation recommendations for the named
executive officers were presented to the compensation committee at their meeting in March of 2007. The
presentation included recommendations of Pier 1 Imports’ chief executive officer and human resources
compensation group on those elements of compensation, plus recommended plan design changes, if any, and a
summary of all awards to all eligible levels of management. From time to time, these type of presentations
may include survey data from a peer group of retail companies for the compensation committee’s consider-
ation. That data may include studies and recommendations from independent outside consultants. Generally,
the compensation committee approves the fiscal year compensation in March of each year with an effective
date in April. Implementation of the equity grant portion of the compensation for the year occurs after
compensation committee and board of directors approval.
Pier 1 Imports’ Policy on Share Ownership
During fiscal 2008, Pier 1 Imports’ board of directors adopted voluntary stock ownership guidelines for
its non-employee directors. These guidelines include acquiring ownership of 50,000 or more shares of Pier 1
Imports’ common stock within five years of becoming a director. Shares counted toward ownership include
open market purchases, beneficial ownership, exercise of stock options, DSU’s, and lapse of restrictions on
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